Your Wheels

More Firms Limiting Use of Company Car

Don't be surprised if your company is getting stingy with employee car perks.

According to a 1998 business management survey, the number of companies that permit employees to use company cars for personal driving has declined during the last 15 years.

So before you pack up the kids and head for the Grand Canyon in your company-issued Ford, better double-check your firm's policy.

About 9.2 million cars and 6.6 million trucks are used for business, according to Automotive Fleet Magazine, including company-owned or -leased vehicles and employees' own vehicles used on the job.

More businesses are restricting personal use of their cars in an attempt to limit company liability during nonbusiness hours, says Nat Workman, editor of a survey published by Runzheimer International, a management consulting firm in Rochester, Minn.

The survey of 385 executives found that 68% of their companies permitted employees to drive business cars for personal use. That's down from 90% of those who responded to a 1983 survey.

Liability is a major concern for companies, says Craig Woo, a partner in Jackson Lewis Schnitzler & Krupman, a labor law firm in Los Angeles.

"Most of the larger employers I've had contact with have always had a concern about liability and limit personal use," says Woo, who works with high-tech and telecommunications firms.

"Limits are appropriate," Woo says, offering the example of an employee who goes out on a Saturday night in the company car, drinks and gets into an accident. The company, understandably, doesn't want to be held liable.

*

Businesses address transportation costs three ways: They can provide a company car or lease a vehicle for the employee; they can pay employees "cents per mile" when they use their own vehicles; or they can give a monthly car allowance to offset business transportation costs for employees, says Michael Ray, a consultant in Northern California with Runzheimer.

Most companies, according to the survey, recapture personal use of company vehicles by charging personal-use costs back to the employee or by adding the value of the personal use to the worker's income tax statement, Ray says.

Some firms will deduct a flat amount from the employee's monthly income to cover use of a vehicle. But it's difficult to accurately estimate costs, Ray notes. Whereas some employees may use the car infrequently for personal trips, he says, "others drive off to Orlando, Fla., in the company vehicle."

Interestingly, 37% of the companies that allow personal use of business vehicles "give their employees this benefit for free," said Runzheimer spokesman Peter D. Packer. As a result, he said, they may not be in compliance with Internal Revenue Service rules that require companies to account for business use of vehicles and show that any personal use is charged to the employee as income.

Employees who are given a company car they don't like and are charged for the personal use sometimes moan that if they're going to have to pay, they'd rather be paying for a Ford Mustang rather than a Chevrolet Lumina, Ray says.

While the typical company-provided car for a sales employee may be a Lumina or a Ford Taurus, executives may drive Buick Park Avenues, Ford Crown Victorias, Lincoln Navigator sport-utility vehicles or the latest Jaguars at company expense, Ray says.

*

Top executives have the most freedom of personal use of their business cars. More than 69% of such execs surveyed by Runzheimer face no limits at all on using the vehicles for personal use.

Forty-nine percent of top managers and 32% of middle managers have no limits, the survey found. But among sales and service employees, only 26% and 14%, respectively, face no restrictions.

Some companies restrict nonbusiness driving to employees or their spouses. Only about 8% of the firms surveyed allow other immediate family members to use the cars. Some companies allow personal-use driving only between work and home or for emergencies.

Though some employees may complain that their companies are being cheap, Ray says he usually sees firms that err on the other side: "The companies don't want to be seen as cheap or stingy, so they end up paying too much."